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Paying GST and your cash flow

Use our instalment and calculation methods to work out how much your income exceeds the GST credits.

Last updated 15 June 2015

As a GST-registered business, you charge and collect GST. If the GST you collect is more than the GST credits you are claiming (for the GST in the products you purchased for your business) you send the difference to us with your business activity statement.

Most businesses do this every three months. It's important to put aside the GST you collect so you can meet your obligations when they fall due.

There are a few ways you can make it easier to manage your GST liability. For example, most small businesses have a choice of two ways to work out the GST in their activity statement: the instalment method or the calculation method.

Instalment method

If your business income is reasonably consistent throughout the year, you might prefer to pay a GST instalment amount (option 3 in your business activity statement). This is an amount we calculate based on what you paid in the previous income year.

It means your quarterly payment is always the same (you can vary the amount if circumstances change), so you know how much to put aside. You then report your actual GST sales and purchases on an annual GST return.

Calculation method

If your business income fluctuates, it's probably best to use the calculation method (option 1 in your activity statement). This means you calculate the GST on sales and purchases each quarter when you do your business activity statement.

See also

Low-fee bank accounts

Many banks offer low or no-fee accounts where you can put aside your GST money. If most of your sales and purchases are subject to GST, then you should put aside one-eleventh of your sales less one-eleventh of your purchases.

Choice of accounting method

If you run a small business you can account for GST on a cash basis. The advantage of cash accounting is that it's easier to manage your cash flow as the money flowing through your business is better aligned with your business activity statement liabilities.'

If you're having trouble lodging or paying

If you're having trouble lodging your activity statement or paying your tax debt on time, contact us as soon as possible. We'll work with you to make alternative arrangements.

See also

Media: Stay in control of your business Link (Duration: 01:38)